FERC hears calls for market reforms to incentivize flexible power supplies

The Federal Energy Regulatory Commission gathered a wave of additional comments from wholesale power market stakeholders as the agency considers possible energy and ancillary services markets reforms in response to growing levels of renewable energy penetration.

The commission launched the proceeding (AD21-10) in February 2021 as part of a broader effort to grapple with thorny market issues posed by an increased reliance on variable generation resources such as wind and solar.

FERC staff subsequently released a white paper in September 2021 detailing how the need for operational flexibility is only expected to grow due to faster changes in supply and demand. The white paper was released ahead of a two-day technical conference, where regional grid operators said they will need additional market products to account for uncertainty in forecasting grid conditions.

Following the technical conference, FERC asked stakeholders to weigh in on a fresh set of questions focused on determining the capabilities or services that will be most valuable as grid operators respond to an evolving resource mix.

Grid operators already exploring options

In their recent responses to those questions, multiple regional grid operators outlined the market solutions they are already exploring.

ISO New England, for example, explained that it does not currently procure, price or compensate generators for fast-responding capabilities in its day-ahead market. "As such, the resources it relies upon for these capabilities in its day-ahead operating plan receive no day-ahead schedules, nor obligations, to provide the fast 'energy on call' that a reliably-planned system requires," the grid operator said.

Therefore, ISO-NE plans to propose three new types of fast-start or fast-ramping capability: 10-minute spinning reserves, 10-minute non-spinning reserves and 30-minute operating reserves. The ISO-NE and its stakeholders are also exploring changes to its real-time market that would provide stronger incentives for power producers to ensure they have the ability to deliver electricity when called upon to do so.

The California ISO said it plans to file tariff changes with FERC in the first or second quarter of 2022 to enhance its real-time market's flexible ramping product. The proposal would enable CAISO to model and price its flexible ramping product for individual resources as opposed to across an entire balancing authority area.

"Modeling and pricing flexible ramping product locationally will help ensure it is deliverable, resulting in market prices that more accurately reflect the value of flexible capacity to the system," CAISO said.

The New York ISO pointed to its multiyear "Grid in Transition" initiative, a stakeholder effort focused on defining operational risks and potential flexibility needs as the state pursues a 100% carbon-free power grid by 2040. That initiative "may include analysis to better understand New York's future flexibility and ramping needs," the NYISO said.

The PJM Interconnection LLC urged FERC to focus on supporting revisions to existing products such as its real-time operating reserve procurement. "Only accurate real-time pricing can provide the appropriate signals and incentives for making efficient use of the flexible resources that exist on the system," PJM said.

Clean energy groups call for further proceedings

Advocacy groups, including the Natural Resource Defense Council's Sustainable FERC Project, urged the commission to look into the classes of resources arbitrarily barred from ancillary services markets. Ancillary services, such as frequency and voltage regulation, are secondary services that help ensure grid reliability.

In the 15-state Midcontinent ISO region, for example, wind and solar resources "are categorically excluded" from the grid operator's ancillary services market, "which reduces competition and thereby harms consumers," the groups said.

The groups also argued that FERC should require grid operators to develop market participation models specifically for hybrid resources such as solar-plus-storage facilities.

The American Clean Power Association suggested FERC open one or more proceedings to investigate market designs that "unduly accommodate or subsidize inflexibility."

"It is critical that the commission, in seeking to improve energy and ancillary services markets design, begin first by removing the baked-in assumptions of inflexibility that, left undisturbed, will inherently constrain the value that new or modified market products can produce," the association said.